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BT Warns Three UK and Vodafone Merger to Damage Competition, Cause Higher Prices

Friday, Jun 14th, 2024 (1:28 pm) - Score 4,760
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Broadband and telecoms giant BT (EE) has warned the Competition and Markets Authority (CMA) that the mega-merger (here) between rival mobile operators Three UK and Vodafone would give rise to a “substantial lessening of competition“, which they claim would “ultimately [result] in higher prices, poorer network quality, and reduced incentives to invest.”

The merger, which would see Vodafone hold a 51% slice of the business and CK Hutchison (Three UK) retain 49%, has previously been promoted by the parties as something that would be “great for customers, great for the country and great for competition,” while also resulting in a major £11bn investment to upgrade the UK’s 5G mobile (broadband) infrastructure and network coverage.

NOTE: The combined business aspires to reach more than 99% of the UK population with their 5G Standalone (SA) network by 2034 and push fixed wireless access (mobile home broadband) to 82% of households by 2030, among other things.

However, the first phase of the CMA’s investigation of this deal has previously raised concerns, not least that it “could lead to mobile customers facing higher prices and reduced quality” (here). The Phase 1 report noted that Three UK was “generally the cheapest” of the four primary mobile operators and that combining the businesses “will reduce rivalry between mobile operators to win new customers“, thus resulting in higher prices.

Competitive pressure can help to keep prices low, as well as provide an important incentive for network operators to improve their services, including by investing in network quality,” said the CMA in March 2023. But the authority added that the deal “may make it difficult” for smaller mobile ‘virtual’ operators (MVNO), such as Sky Mobile, Lebara and others, to negotiate good deals for their own customers due to there being fewer suppliers.

In addition, the CMA questioned some of the data and commitments provided by Three UK and Vodafone. For example, the authority said it “does not believe that there is detailed and verifiable evidence demonstrating that any customer benefits from any accelerated roll out of 5G SA would be timely, likely to materialise or sufficient to outweigh the Significant Lessening of Competition.

Finally, and somewhat contrary to previous statements made by Vodafone and Three UK about being “sub-scale, unable to cover their cost of capital, and constrained in their ability to invest and compete effectively“, the CMA found that both operators were in fact “viable and competitive businesses and that they would continue to invest in their networks absent the Merger“. The CMA therefore noted that if the merger did not go ahead, both operators would in fact “continue to compete with each other, as well as with other mobile operators, in a broadly similar way as today.”

BT’s Scathing Response

Since then, the CMA has been busy conducting a deeper Phase 2 investigation, which this week published the first of several responses from other companies and organisations. But the most important submission came from BT (here), which largely agreed with the CMA’s Phase 1 findings and appeared to spare no blushes in that regard.

Key Points from BT’s Submission

• The proposed deal will create a Merged Entity [Vodafone and Three] with a disproportionate share of capacity and spectrum, unprecedented in UK and Western European mobile markets, which will substantially lessen competition and deter investment (the Asymmetry Concern).

• In addition, BT agrees with the CMA’s Phase 1 conclusion that the Merged Entity’s participation in MBNL [i.e. the network sharing agreement between EE and Three] will result in lower levels of investment arising from its access to commercially sensitive information (CSI) relating to BT’s investment plans (the MBNL CSI Concern).

• Thirdly, BT also agrees with the CMA’s Phase 1 conclusion that the Merger will result in direct harm to BT’s ability to compete, through the Merged Entity’s participation in MBNL (the MBNL Frustration Concern).

• Whilst each of these three concerns is significant in and of itself, their combination exacerbates the adverse impact the Merger will have on competition in UK mobile markets and, ultimately, UK consumers.

• BT welcomes the CMA’s conclusions on the MBNL CSI Concern and the MBNL Frustration Concern at Phase 1 and its intention to further investigate these concerns at Phase 2. However, BT considers that the CMA’s Phase 2 investigation must also consider carefully the Asymmetry Concern, i.e. the direct impact that the Merged Entity’s capacity and spectrum asymmetry will have on rivals’ (and therefore on the Merged Entity’s) incentives to invest.

• BT agrees with the CMA’s conclusions at Phase 1 that the Merging Parties’ claimed efficiencies appear to be unsubstantiated, are not incremental to today’s market outcomes (even if realised), and will not be passed on to UK consumers in the form of lower prices or greater investment.

• Overall, BT believes that the combination of extreme capacity and spectrum asymmetry arising from the Merger, along with the unprecedented access that the Merged Entity will have to BT’s (as well as to VMO2’s) strategic investment plans, and the Merged Entity’s ability and incentive to disrupt the effective functioning of MBNL, will give rise to a substantial lessening of competition in UK mobile telecoms markets, ultimately resulting in higher prices, poorer network quality, and reduced incentives to invest – all to the detriment of UK consumers.

Naturally, BT’s opposition to the deal stems from their own understandably vested interests, as well as legitimate concerns around spectrum ownership and network sharing. But we shouldn’t pretend that they’re seriously worried about consumers paying higher prices. After all, EE itself is far from being a budget level operator, and if any rivals did significantly raise their consumer prices, then that could conceivably benefit EE, at some level.

The strong expectation is that Vodafone and Three UK will end up trying to placate such concerns via a series of binding commitments. In this case, we expect that such commitments may include an agreement to divest some of their radio spectrum holdings to rivals, as well as a pledge to protect prices for an initial period of years, support for MVNO operators and to fix concerns around network sharing.

However, it remains difficult to know how strict the CMA will be on all of this when they give their verdict later in the year, although all signs suggest that they’ll probably attempt to extract a hefty price for approval – assuming the deal isn’t blocked outright. The question will then be whether or not Vodafone and Three UK are willing to pay such a price; we think they will.

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By Mark Jackson
Mark is a professional technology writer, IT consultant and computer engineer from Dorset (England), he also founded ISPreview in 1999 and enjoys analysing the latest telecoms and broadband developments. Find me on X (Twitter), Mastodon, Facebook and .
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37 Responses
  1. Avatar photo JP says:

    Well they would…. duuuur!

  2. Avatar photo Jammie1408 says:

    There rude to talk after buying up EE and rebranding there’s and EE products and hiking the prices over the years.

    1. Avatar photo Iain says:

      Quite, it’s probably true but it’s absolutely hypocritical of them.

    2. Avatar photo Ad47uk says:

      I am glad someone posted this.
      Yep, They don’t like it up them 🙂

      I am not happy about the merger myself, but only because I hate Vodafone as much as I hate BT.

    3. Avatar photo ex-techie says:

      Says the company that charges the most and has the worst service? Bit hypocritical.

  3. Avatar photo Jason says:

    And BT wouldn’t profit from less competition? Sounds like they’re afraid of more competition

  4. Avatar photo Meritez says:

    But according to BT, the merger of Orange and T-Mobile/One2One did not affect competition or raise prices or create a Mobile Network with far more bandwidth than it’s competitors?

    Where’s OFCOM when you need them to break apart the biggest UK provider for anti-competitive practices.

  5. Avatar photo DD says:

    BT has some front… I guess they’re speaking from experience.

    1. Avatar photo Dialup says:

      Quite but even a stopped clock is correct twice per day… The merger would clearly be bad for consumers.

  6. Avatar photo Declan McGuinness says:

    Was okay for Orange and T-mobile to merge though eh BT are only worried because Three and Vodafone will have a class leading network and EE will be the smallest network by customer size.

  7. Avatar photo finaldest says:

    The biggest mistake was allowing the merger of T-mobile and Orange made even worse mow that EE and BT are under the same umbrella.

    Competition has never been as bad as it is now. I welcome the Vodafone and Three merger.We may very well then see more competition.

  8. Avatar photo Four says:

    I dont even know why Three wasted time and money with this merger nonsense, they shouldve sold the network to an interested outsider.

  9. Avatar photo Simon says:

    BT are literally just scared. Once the merger happens, EE/BT become the most expensive + the smallest operator. Simple facts

    1. Avatar photo Declan McGuinness says:

      Spot on!

  10. Avatar photo Chris says:

    I hope the merger doesn’t go ahead, Three seem to be doing great on their own, their coverage has improved massively recently, the only time I have issues with 3 is in central London, Vodafone has become terrible since they switched off 3G, my phone stays on 2G a lot

    1. Avatar photo Ad47uk says:

      Vodafone was supposed to have been the best coverage, but for me even in the days of 2G, it was worse than any of the others here. I dropped Vodafone and went to Orange, which was a lot better then. Vodafone was my first mobile network, in the days when we had to pay for rental and calls 🙂

      I am with Smarty these days, they provide a pretty good service.
      Vodafone is still not great up here, according to my brother.

    2. Avatar photo JP says:

      Chris – Seems like your talking from your point of view, I can assure you Three is struggling in very large parts still, and seemingly don’t really have any avenues to explore other than partnering… however that is from my geographical point of view.

      Not saying they need Vodafone but they’ve become stuck in some parts

  11. Avatar photo XHX says:

    Ahh, BT, funny , tell me another one.

  12. Avatar photo Andrew says:

    Typical “why didn’t we get to do this” company response

  13. Avatar photo Terry Nutkins says:

    Let’s be real here, and stick to the facts. BT/EE have done nothing but PUT UP all their prices and costs for their tariffs since they merged. EE was once, a good mobile operator, and very willing to offer some great deals on mobile and broadband. BT bought them, and all they’re every interested in, is profit. BT is a machine, and always gets it’s own way. They’re running scared of the Voda/3 merger, as they know full well, that they’ll have some proper stiff competition in the future, whereas at the moment they bulldoze their way through everything in true BT style.

  14. Avatar photo Andrew Jones says:

    BT: a merger would be terrible for consumers.

    Also BT – oh yes, yes we did merge.

  15. Avatar photo Network says:

    I have to agree with Iain when EE and BT went together they wear facing the same problem so BT are hypocrites. It was better in 2001 you had (BT Celnet AKA O2 UK) Orange (T-Mobile AKA One2One) and 3-UK came along in 2003 Hutchison launched 3-UK. Hutchison had Orange in 1993

  16. Avatar photo Common sense says:

    BT are still being pain for line rental so not sure what they moaning about if anything unless they want another virgin media to worry about as with merger vodathree or 3fon could lay there own lines down

  17. Avatar photo R. Mark Clayton says:

    Bit rich coming from BT who exploit their dominant market position ruthlessly!

  18. Avatar photo Nick Roberts says:

    I have to say that the prospect of saving £500 a year by switching from my BT landline broadband to a 4G mobile service is so tempting that I have been running a mobile router in fail-over mode at random times during the last month. I’ve had no problems at all with either the data rate or service accessibility. So, I will be running a full blown test for a month and if all goes well I’m ditching the landline. BT fannying around with Digital Voice and zero prospect of getting FTTP anytime soon, as Virgin cable is already available in the street, adds to the argument.

    During the test sessions, I was able to stream four channels of live TV simultaneously over mobile and Ookla was telling me the connection only was running at 7mbps down and 2up !!! perfectly adequate for my needs.

    1. Avatar photo JohnH says:

      I ran mobile only for 3 years after a decade of useless ADSL where any rain would affect the line, every visiting engineer agreed the local wiring was well past its proper life and they were constantly repairing faults only for them to reappear weeks later. Now on FTTP, its good but other than a better ping not much better than 4G. I used a dual WAN draytek and ended up with 2 4g routers pointing at different masts so if one went down the other was working.

    2. Avatar photo Buggerlugz says:

      It would be Nick if half the masts local to your house don’t get they’re bandwidth totally soaked up at peak times, making it utterly unusable. (past experience speaking here!) I’ve seen over 200Mbps from 4G in the early hours of the morning and >1Mbps from 5pm to 11pm.

    3. Avatar photo Nick Roberts says:

      What bugs me is that there’s no concessionary rate for OAPs with BT, unless you are on State Benefits.
      With the recent 8-15% increase in general cost of living, and me hardly ever using the landline for outgoing calls, the total BT bill £900 per year is mainly paying the overheads of having a landline and the money could be spent more usefully elsewhere, such as a replacement for my 34 year old bed, ditto comfy chair and car repairs and a new bathroom.

      Although the Halo device is included with the basic package I have doubts it can be used in “Always-on” mode and I believe there are costs associated with using it in “Fail-over” which simply add to one’s existing total bill. That would be no good to me in financial terms.

      I must admit I didn’t bother experimenting with the Halo thing because like the BT Smart Hubs it appears to be completely locked down and is, I believe locked to using a BT SIM.

      So I bought a cheapo 4G router and a third-party 4G PAYG SIM (80GB per month for £20) which, incidentally, is totally open for the user to set-up as required (Unlike tbe BT kit) and which delivers broadband @ 7-10mbps with do discernible difference to the user than the 50 Mbps service (Actually delivers 37-45 Mbps) provided by BT yielding a saving of £660 a year.

      Incoming calls will in future be directed to either my ancient PAYG Blackberry or another more recent Android PAYG mobile, at no cost to me or callers on a mobile contract with free minutes.And my few outgoing calls will go by PAYG mobile and the mobile broadband “Fail – over” will be the Android PAYG mobile which supports internet tethering.

      Bye, bye BT,… unless the brilliant (?) marketeers can come up with a package which has costs more in keeping with my willingness and ability to pay. I can’t afford to subsidise them any longer.

  19. Avatar photo MountfordD says:

    So BT is facing some credible competition and they don’t like it. Tough. That’s the world of private enterprise. If you want to swim with sharks then be prepared to get eaten. Would love to see BT get taken down a peg or two. Call it retribution for destroying my much loved Plusnet.

    1. Avatar photo JP says:

      Was waiting for someone to highlight Plusnet’s demise – Kudos

  20. Avatar photo Jim says:

    Of course all this smacks of the pot calling the kettle black, it’s hard however when orange and tmobile were allowed to merge. Created a precedent. I am totally against the merger as it will absolutely lead to higher prices. The telecoms market used to be vibrant, you had the independents ie cpw/p4u, you had orange, tmobile, o2, voda and 3. All this competition led to lower prices.

    Now with all this consolidation in the sector virgin merging with o2, orange and tmob creating ee which in turn was bought by bt. The telecoms industry is a cartel

    1. Avatar photo Buggerlugz says:

      This is modern day Britain Jim. What ISN’T a cartel to enable the wealthy to increase their wealth?

  21. Avatar photo Spotify95 says:

    This is purely because BT, or should I say EE, don’t want anyone to have more mobile frequencies than them and don’t want another mobile network to have greater network coverage either. Complete BS.
    I’d personally allow the merger to give EE some competition, remember when Orange and T-Mobile merging in 2010?

    1. Avatar photo T says:

      The BT merger is different for all you BT haters. BT wasn’t an independent mobile network when they purchased Orange/T-Mobile (EE). We didn’t lose or gain a network it still remained as 4 players. This merger would see that down to 3 so it’s a different kettle of fish. Either way, why wouldn’t they want to protect themselves that’s literally how businesses live and breathe. BT is to big of a machine to sit still and not chip in with ‘worries’ in the scale of things.

  22. Avatar photo Buggerlugz says:

    Pot, Kettle, Black. springs to mind.

  23. Avatar photo Umreal says:

    oh FFS. BT of course though have been allowed to buy plusnet, get into tv, buy EE (who of course themselves were the result off a merger between Orange and T-mobile) all this while being the same company who own the monopoly on fixed line infrastructure (e.g all the ducts and wires).

    They should be broken up tomorrow just for the sheer temerity of this, that really would lead to better prices for all and more importantly a level playing field.

  24. Avatar photo MikeP says:

    This must be a different BT from the one that’s just been fined for not complying with OfCom rules over contract terms notification, and also charged early contract termination fees to people who hadn’t received those terms. Thereby acting anti-competitively.

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